NAB priced a US$1.25bn (Eu950m, A$1.34bn) five year covered bond during what was a busy session in the US market yesterday (Tuesday), with a lead syndicate banker seeing the deal as having come flat to the secondary curve for Australian issuance in dollars.

Leads Bank of America Merrill Lynch, HSBC, NAB, RBC and TD Securities priced the 144A deal at 33bp over mid-swaps, the middle of guidance of 33bp over. They launched the deal yesterday morning in Europe on the basis of initial price thoughts of the mid 30s over. More than $1.4bn of orders were placed for the transaction.

A lead syndicate official said that it is uncommon for US dollar deals to be launched in Europe, but that the approach worked well, as borne out by the distribution statistics. The European opening time also allowed Asian interest to be gathered.

EMEA took 53% of the bonds, the US 23%, Canada 14%, and Asia 10%.

Banks were allocated 54%, central banks and agencies 23%, asset managers 12%, insurance companies 7%, and private banks 4%. Some 60 accounts participated.

The new issue was one of several FIG deals in the US market alongside high corporate activity yesterday.

At 33bp over, NAB’s deal came flat to the secondary market curve for Australian US dollar covered bonds, according to the lead syndicate official. The transaction is the tightest five year Australian dollar benchmark covered to have hit the market – only a Commonwealth Bank of Australia (CBA) $2bn three year deal in January 2013 was priced tighter, at 32bp over.

A syndicate banker away from the leads said that US dollar covered bonds trade quite technically and that new issue premium (NIP) assessments can therefore vary, but he said that he saw NAB’s deal as coming with a new issue concession of some 3bp-4bp. He put a NAB February 2019 at 28bp over, and said that the last TRACE print on a Westpac May 2019 issue before the NAB deal was announced was equivalent to 27.5bp over.

He said that demand was weaker than that for many other FIG deals in the market yesterday, putting the average level of oversubscription, away from capital deals, at around 2.5 times, but said that although it “was not the food fight like some of the other deals were”, overall NAB’s transaction was positive.

“The deal was a bit below average on the order book but that’s not really surprising because there’s more breadth and depth in the senior unsecured investor base,” he said. “The pricing was good, so it’s a very positive outcome and shows that although the market is not raging like others are it is still alive and offers access for high quality names.”

A syndicate banker on the NAB deal dismissed the suggestion that the size of the order book was disappointing, saying that it was closed in the morning New York time to allow for quick pricing.

Wells Fargo and Bank of Tokyo Mitsubishi UFJ were among issuers tapping the US high grade market yesterday, and were said to have built order books of around $8.6bn and $14.8bn (combined books for multi-tranche deals), respectively, while a Lloyds $1bn five year was three times oversubscribed.

National Australia Bank last tapped the US market in November last year, and yesterday’s deal is only the third US-targeted new issue this year. Westpac Banking Corporation and CBA sold $1.75bn and $1.25bn five years at 35bp over in May and June, respectively.

NAB’s dollar deal comes after it last week priced a Eu500m tap of a May 2017 covered bond, at 9bp over mid-swaps.

“Getting $1.25bn done and what looks like no new issue concession looks like a good result,” said the lead syndicate banker. “With the euro tap, it’s been a good couple of weeks.”

The 33bp re-offer spread for the dollar benchmark equates to 6.75bp over in euros, according to the lead syndicate banker, who said that is “not a long way” from where NAB would do a new issue in euros.

The new NAB September 2019s were today (Wednesday) said to be trading around 1bp tighter versus Treasuries.